Crackdown on political meddling in City watchdogs
Ministers should be held to account by Governor, banking report recommends
The Bank of England should produce an annual report to Parliament on whether ministers have unduly sought to push regulators into going soft on banks, the Parliamentary Commission on Banking Standards recommends today.
The commission's call follows fears that ministers have in the past pushed regulators to go easy on the City, particularly when the Financial Services Authority used to boast of its "light touch" regulation in the years leading up to the financial crisis.
The plan envisages that Mark Carney, the incoming governor, would report to the Treasury Select Committee. That breaks new ground for the Bank, which would be given a clear role of holding ministers to account if they attempt to influence City watchdogs unduly.
"The Governor of the Bank of England is, by virtue of his responsibilities and independence, uniquely well placed to sound the alarm if bank lobbying of government is becoming a concern," the report says. "The commission recommends that it be a specific personal responsibility of the Governor to warn Parliament, or the public, in such circumstances."
It adds that politicians "can be tempted to heed the blandishments of bankers and succumb to lobbying. This makes the regulators' job all but impossible. No one can tell whether or when these risks may emerge. But the danger remains."
There are now concerns that the City will lobby to push the Government into watering down the commission's recommendations, despite the panel's heavyweight make-up. Members include the former Cabinet Secretary Lord Turnbull, former chancellor Lord Lawson and the Archbishop of Canterbury. It was headed by the Treasury Select Committee's chairman Andrew Tyrie.
The CBI director general, John Cridland, gave a cautious response to the report, saying: "There's no way we'll get the economy firing on all cylinders again without a healthy banking system." But he criticised proposals for new sanctions on miscreant bankers: "There are tough criminal sanctions in the UK for those who engage in fraudulent behaviour. Enforcing these must come before the introduction of new sanctions." The CBI welcomed the rejection of EU plans for a bonus cap.
Mark Littlewood, of the Institute of Economic Affairs, accused the Commission of "ignoring the lessons of history. Tighter regulation over the past 25 years has not created a more ethical climate".
Unions said that the report should have gone further, and added that it could have recommended full nationalisation of RBS.
Government told to report on RBS break-up
The Government must immediately commission a report on breaking up Royal Bank of Scotland, and scrap the body created to oversee its stake in the banking sector.
The Parliamentary Commission on Banking Standards said if the operational and legal obstacles to a good bank/bad bank split were insuperable, Parliament should be told why, with the Government's analysis submitted by September.
A split, the report says, could include breaking the "good bank" up into more than one entity. It commended Stephen Hester, the chief executive, for cleaning up RBS's balance sheet but added that UK Financial Investments, which oversees the taxpayer's shares in banks, had failed.
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